UK Finance Ministry, Bank of England work to contain Silicon Valley Bank fallout
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A closed branch of Silicon Valley Bank in San Francisco, California, on March 10, 2023.
PHOTO: NYTIMES
LONDON – Britain’s Finance Ministry and the Bank of England are working to minimise the disruption that could arise from a collapse of the United Kingdom arm of the US-headquartered Silicon Valley Bank (SVB), which has been seized by United States regulators,
Talks were scheduled for Saturday to discuss the issues faced by British technology companies affected by the collapse, the ministry said in a statement.
The Bank of England on Friday said it was seeking a court order to place SVB UK in an insolvency procedure.
“The government recognises that tech sector companies are often not cash flow-positive as they grow, and that they rely on cash on deposits to cover their day-to-day costs,” the statement said.
Advisory firm Rothschild & Co is exploring options for SVB UK as insolvency looms, two sources familiar with the discussions told Reuters.
More than 250 British tech company chief executives signed a letter
“The recent news about SVB going into insolvency represents an existential threat to the UK tech sector,” the letter said.
“This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.
“Most businesses are operating on very fine margins in the current economy and the contagion from the initial insolvencies will be vast and impact the economy far beyond the tech sector.”
Sky News had reported earlier on Saturday that a British clearing bank, The Bank of London, was considering a rescue bid for the British arm of SVB.
Under insolvency proceedings for banks in Britain, some depositors are eligible for up to £85,000 (S$138,000) of compensation for cash held at lenders, or £170,000 for joint accounts.
Britain’s Department for Science, Innovation and Technology is also talking to the affected tech companies.
A further statement will be issued after the talks on Saturday.
Ms Susannah Streeter, head of money and markets at the investment firm Hargreaves Lansdown, said in an e-mailed note that there would be aftershocks in the tech sector next week.
“Urgent talks regarding potential takeovers will be ongoing, with regulators under pressure to negotiate bailouts to avoid further damaging fallout,” she said.
The ministry said Britain’s banking system remained strong and resilient. The issues affecting SVB were specific to it and did not have implications for other banks operating in Britain, the ministry said. REUTERS
